Northern Rock - History

History

Northern Rock Building Society was formed in 1965 as a result of the merger of two North East Building Societies; the Northern Counties Permanent Building Society (established in 1850) and the Rock Building Society (established in 1865). During the 30 years that followed, Northern Rock expanded by acquiring 53 smaller building societies, most notably the North of England Building Society in 1994.

Along with many other UK building societies in the 1990s, Northern Rock chose to demutualise and float on the stock exchange, to be able to expand their business more easily. Throughout this period a concern against demutualisation was that the assets of a mutual society were built up by its members throughout its history, not just by current members, and that demutualisation was a betrayal of the community that the societies were created to serve. Northern Rock chose to address these concerns by founding the Northern Rock Foundation, which funded community-based projects. At its Stock Exchange flotation Northern Rock distributed shares to members with savings accounts and mortgage loans, and the flotation share price was £4.51908. It joined the stock exchange as a minor bank and was expected to be taken over by one of its larger rivals, but it remained independent.

In 2000, Northern Rock gained promotion to the FTSE 100 Index, but was demoted back to the FTSE 250 in December 2007 and later suspended from the LSE due to the bank's nationalisation.

On 14 September 2007, during the financial crisis of 2007–2010, the Bank sought and received a liquidity support facility from the Bank of England, following problems in the credit markets caused by the US subprime mortgage financial crisis. The bank was more exposed than others to restrictions in the supply of credit because of the way it had funded its expansion.

The bank was nationalised at 00:01 on 22 February 2008 as a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money. In doing so the Government effectively took ownership away from its shareholders, as of August 2011 without reimbursement. The media also reported cases where some shareholders had their life savings in the shares, which were taken from them. The shares had already lost over 90% of their value prior to nationalization, and were valued at nil in an independent valuation process.

On 1 January 2010 the bank was split into two parts, assets and banking. In June 2011 the bank was officially put up for sale back to the private sector, and on 17 November 2011 it was announced that Virgin Money were going to buy Northern Rock plc for £747 million up front and other potential payments of up to £280 million over the next few years. The sale went through on 1 January 2012. The government said it had no plans to sell Northern Rock (Asset Management). There would be no further job losses, except for the ones already announced. Virgin also pledged to keep the headquarters of the bank in Newcastle upon Tyne. The combined business now operates under the Virgin Money brand.

On 12 October 2012 Northern Rock plc was renamed Virgin Money plc, and Virgin Money Limited was renamed Northern Rock Limited. By October 2012 the Northern Rock website had effectively become a 'soft redirect' to Virgin Money's website.